British Pound (GBP) Weekly Forecast: Anticipation Around UK GDP Heightened by Recessionary Fears
What's on this page
POUND STERLING TALKING POINTS
- UK GDP in focus.
- Technical analysis shows market uncertainty.
GBP/USD FUNDAMENTAL BACKDROP
The Bank of England (BoE) rose interest rates last week but markets focused on the central banks expectation of a recession in Q4 this year. Recession talk has been stewing of late and now that the BoE surprisingly aired their interpretations of the current UK economic climate, next weeks GDP release will carry even more weight than any previous issues this year.
The rest of the week focuses on U.S. centric data but overall a relatively uneventful week with no real scheduled activity from Fed speakers either.
GBP/USD ECONOMIC CALENDAR
Source: DailyFX Economic Calendar
GBP/USD DAILY CHART
Chart prepared by Warren Venketas, IG
GBP downside extended on Friday after the U.S. NFP beat with cable almost reaching the 1.2000 psychological level. Daily GBP/USD price action shows nothing in the way of chart patterns of a firm directional bias – reiterated by the midpoint 50 reading on the Relative Strength Index (RSI). My view on GBP/USD remains skewed to the downside as recession prospects, geopolitical tensions, stronger U.S. economy and an unrelenting Fed supports a stronger greenback against the pound and the 1.2400 level seems a long way off at this point ceteris paribus.
Key resistance levels:
- 1.2400/100-day EMA (yellow)
- 50-day EMA (blue)
Key support levels:
- 1.2080/20-day EMA (purple)
MIXED IG CLIENT SENTIMENT
IG Client Sentiment Data (IGCS) shows retail traders are currently LONG on GBP/USD, with 72% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however due to recent changes in long and short positions we settle on a short-term cautious bias.
Contact and follow Warren on Twitter: @WVenketas
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